State high court narrows ‘commercial speech’ to uphold free speech rights on published notice for class action suit

The California Supreme Court issued its decision in Simpson Strong-Tie Co. v. Gore on May 17, 2010, narrowly construing the so-called “commercial speech” exemption to California’s anti-SLAPP statute, Code of Civil Procedure Section 425.17(c). In a unanimous opinion, the Court affirmed the decisions of the trial court and court of appeal, holding that the exemption did not apply to a Notice published by attorney Pierce Gore, who was seeking clients for a possible class action lawsuit, and that Gore was therefore entitled to invoke the anti-SLAPP statute to protect his free speech rights in publishing the Notice.

The Court explained that Section 425.17(c)’s “content” requirement, which sets out a multipart test for application of the exemption, applies both to statements or conduct that occur in soliciting business and also to statements or conduct that occur while a product or service is being delivered. The Court also made clear that the exemption is triggered only if the statement or conduct giving rise to the claim itself satisfies the statute, and not merely if it is accompanied by a statement or conduct that satisfies the statute. Thus, beyond lawyer advertising, the Supreme Court’s decision confirms that California’s anti-SLAPP statute remains available to protect the exercise of free speech in many commercial settings.

The proceedings below

Simpson Strong-Tie Co. sued Pierce Gore, a plaintiffs’ class action attorney, over a legal advertisement Gore published in a local newspaper to locate potential plaintiffs for a class action lawsuit he intended to file. The ad stated that if a consumer’s deck was built with galvanized screws manufactured by Simpson or two other manufacturers, the consumer “may have certain legal rights and be entitled to monetary compensation, and repair or replacement of your deck. Please call if you would like an attorney to investigate whether you have a potential claim.” Simpson promptly sued Gore for libel, trade libel, false advertising and unfair business practices.

Gore filed a Special Motion to Strike under California’s anti-SLAPP statute, Code of Civil Procedure Section 425.16, a powerful procedural tool available to defendants who are sued for the exercise of free speech or petitioning activities. In response, Simpson did not contest that the anti-SLAPP statute applied by its plain terms. Instead, it argued that an exemption from the anti-SLAPP statute for a subset of “commercial speech,” Code of Civil Procedure Section 425.17(c), applied to Simpson’s claims.

Section 425.17(c) exempts from the anti-SLAPP statute’s protection statements or conduct by a seller of goods or services made to a prospective or actual buyer of those goods or services, if “[t]he statement or conduct consists of representations of fact about that person’s or a business competitor’s business operations, goods, or services, that is made for the purpose of obtaining approval for, promoting, or securing sales or leases of, or commercial transactions in, the person’s goods or services, or the statement or conduct was made in the course of delivering the person’s goods or services.”

The trial court rejected Simpson’s argument, finding that the exemption did not apply—and the protections of the anti-SLAPP statute were available to Gore—because the Notice made no statement about Gore or a business competitor. It granted Gore’s anti-SLAPP motion after determining that Simpson was not likely to prevail on any of its claims.

The court of appeal affirmed the trial court’s decision in a published opinion. In addressing the “commercial speech” exemption, the court first disagreed with a prior court of appeal decision that had placed the burden of establishing the exemption on the party who filed the anti-SLAPP motion. Invoking well-established law holding that a party that invokes an exemption bears the burden of proof and persuasion as to that exemption, the court concluded that Simpson bore the burden.

The court next held that the promotion part of the exemption did not apply because although the Notice was “made for the purpose of … promoting … [Gore’s] services,” Simpson’s claims did not arise from a representation of fact about Gore or a business competitor. Finally, the court held that the delivery part of the exemption did not apply because Gore was not delivering his services, but instead was seeking business from prospective clients. The court then rejected Simpson’s arguments on the merits, and affirmed the trial court’s dismissal.

The Supreme Court decision

Simpson petitioned for review on a variety of grounds, challenging both procedural matters and the decision on the merits. The Supreme Court granted review on two narrow questions regarding the scope of Section 425.17(c): “(1) Which party bears the burden of persuasion with respect to the applicability of the anti-SLAPP exemptions set forth in Code of Civil Procedure section 425.17, subdivision (c)? (2) Does Code of Civil Procedure section 425.17, subdivision (c), exempt from anti-SLAPP protection an advertisement by a lawyer soliciting clients for a contemplated lawsuit?”

In a decision authored by Associate Justice Marvin Baxter on behalf of the full Court, the Court affirmed the lower courts’ decisions in full. The Court first held that, like other exemptions, the “commercial speech” exemption “should be narrowly construed.” Next, it concluded that, consistent with well-established California law, the party invoking the exemption bears the burdens of proof and persuasion as to that exemption, disapproving a court of appeal decision that had held to the contrary. The Court then turned to the substance of the “commercial speech” exemption.

Simpson argued that the Legislature created a “content exemption,” triggering the exemption for attempts to sell a product if the three elements enunciated in the statute are satisfied, and a “delivery exemption,” exempting all statements or conduct that occur in the course of delivering a product. The Court held that while Simpson’s construction of the statutory language was “plausible,” it would be contrary to the statute’s legislative history and lead to absurd results.

Section 425.17 was enacted in 2003 to enhance the anti-SLAPP statute by ensuring that participation in matters of public significance is not chilled through abuse of that statute. As the Court explained, the Legislature carefully constructed the Section 425.17(c) exemption, establishing three specific criteria for the statute to apply. Yet, because Simpson also urged an extremely broad interpretation of the “delivery prong” (which would extend even to advertisements made in the normal course of business) Simpson’s interpretation would effectively jettison those three elements, leading to absurd results. The Court also rejected Simpson’s attempt to narrow the exemption to avoid those absurdities, holding that the plain language used by the Legislature provided the appropriate narrow test.

Next, the Court rejected Simpson’s claim that the statements at issue “arise from … representations of fact about [Gore’s] … business operations, goods, or services,” finding that because the alleged defamatory statements are about Simpson—not one of Gore’s competitors—they fall “squarely outside section 425.17(c)’s exemption for commercial speech.”

Simpson argued that Gore made statements about himself, by inferring that he had investigated Simpson’s screws and found them defective and promising to investigate to determine if a potential client has a claim. The Court rejected this argument because Simpson’s claims did not arise from these statements, but instead from the alleged defamatory implication about Simpson’s screws. Given the court’s obligation to construe the statute narrowly, applying the court’s earlier ruling in Club Members for an Honest Election v. Sierra Club (2008) 45 Cal.4th 309, 312, 316, it refused “to allow plaintiffs to evade the limitations of the statutory text by mere wordplay.”

Finally, the Court rejected Simpson’s argument that it sufficed if the statement giving rise to the claim accompanied statements that satisfied the statutory criteria, finding that such an approach was contrary to the language of the statute and the legislative history. In addition, the Court noted that Simpson’s interpretation would exempt from the anti-SLAPP statute’s protection core political speech by a business if the business also mentioned its products in the same publication.

Conclusion

The California Supreme Court once again has narrowly interpreted the Section 425.17 exemptions from the anti-SLAPP statute to ensure the ongoing vitality of the anti-SLAPP statute itself. In the face of an increasing number of trial courts that have relied on this exemption to deny an anti-SLAPP motion, which in turn bars immediate appellate review, the Supreme Court’s opinion will be welcome relief. Now, defendants who have been forced to defend against application of the Section 425.17(c) exemption to protect their rights have a Supreme Court decision interpreting the exemption narrowly.